VeriSign is seeing its nightmare come true with a California lawsuit brought by Optima Technology for wrongful handing over of the company’s domain name to a former employee.
The suit, which demands $3 million in compensation, comes after the company that owns and runs the .com registry failed to act properly when Michael Decorte seized control of the domain optimatech.com in 2001. He sent a letter to VeriSign that lacked the required authorisation and the company claims it was not properly consulted. It won back the domain the following year.
"We are taking this action now, after notifying Network Solutions on several occasions that its actions caused our company a great deal of damage and lost revenue,” said Barry Eisler, Optima’s president, who says the domain was originally registered in 1990 - the same year the company was formed.
However, the case only comes following the hard-fought-for precedent won by the owner of Sex.com, Gary Kremen, who saw his domain given away in 1995. It took him six years and a legal battle that involved the Supreme Court for VeriSign to be held accountable in July this year.
The decision by the United States Appeal Court saw domains become property in law for the first time and its judgement held VeriSign responsible. The decision was widely expected to cause a glut of lawsuits against the company from other furious domain owners. Optima is the first to take advantage of the new law.
"I am happy that this is finally happening," Gary Kremen told us from Sex.com’s headquarters in San Francisco. "It’s about time."
In the lawsuit, Optima alleges that DeCorte along with another former employee, Raymond Martin, stole the domain and used it to divert traffic and revenue from the company.
Using an analogy originally put forward by Kremen’s lawyers, Eisler was quoted as saying: "This is no different than parking your car with the valet, giving your key to the valet attendant and coming out after a wonderful dinner only to find your car was stolen as the valet gave your keys to a crook without checking to see if you authorized the theft."
Meanwhile, Kremen is due to return to court with VeriSign to assess the damages the company has to pay him for handing over Sex.com to Stephen Michael Cohen, currently a fugitive from justice and believed to be living in Tijuana, Mexico.
The Appeal Court suggested that VeriSign be liable for $40 million in lost profits that Kremen won from Cohen in April 2001. Kremen is also expected to demand punitive damages on top of that figure.
Kremen was delighted with the lawsuit: "I agree with Optima in this case - VeriSign must be held accountable. I believe that in the next several months, more cases like this will come out." He added: "We are aggressively going after VeriSign for damages. In fact, we just filed a very strong case management statement today."
Jack Geering, Optima’s senior vice president, said the situation raised serious questions over Internet governance: "To be fair, competition has to be based on a level playing field – companies must compete on the basis of innovation and according to the laws of the land. All we ask is that Network Solutions play by these rules and stop conducting damaging and possible illegal actions against domain holders like Optima."
VeriSign is under increasing pressure from elsewhere as well after it received a lawsuit this month from GoDaddy over its widely criticised SiteFinder software that redirects unregistered domains to its own webpage. It has turned its back on demands by overseeing organisation ICANN that the service been withdrawn pending a review. And just last week VeriSign was again lambasted by the FTC over its misleading email campaign to steal competitors domains by forcing them to "renew" domains with it.
With domain owners seeking to punish VeriSign for its sloppy and unhelpful approach to illegal domain transfers, the most powerful company on the Internet may soon find itself humbled. ®